Weird Lease - Repair Issue

quad_red

Hey All,
I need some advice here. Basically, the issue is in regards to a long term lease held on a building. This week, a letter was recieved from the Property Management Comp stating that works needed to be done with a Survey from a Builders attached. The amount of the repairs is absolutely staggering - truely flabbergasting! Far far more than even the annual rent.

Anyway, the Property Management Comp say the tenant is liable for all repairs and has to pay up asap.

The contract, which was signed ten years ago and I have just seen, states:
"If and whenever the Landlord believes or is advised that works should be carried out … the Landlord shall serve on the Tenant notice in writing indicating the nature of the works and an estimate of the cost of the Work (“the provisional charge) and the Tenant shall pay to the Landlord the Provisional Charge within fourteen days of the service of such notice. "

Is this normal? Should this contract have ever been signed?

Any advice would be most appreciated.

Cheers,
Quad

wyndham

What type of repairs are involved?

quad_red

wyndham wrote:

What type of repairs are involved?

Most of it is aesthetic - the building is old enough so the windows, walls need to be painted etc.

The gutters need some work. According to the builders survey there is dampness in the walls and there is some vague reference to exploratory work being needed. There is also mention of scaffolding being needed.

Now, some work was expected. But the scale and cost is totally out of this world! :eek:

The_Conductor

Normally the Landlord would be paying an annual management fee to the Management Company. This would normally contain a contribution towards a sink-fund, to cover periodic repair work/painting/etc issues, things that would tend to be done in common on the complex.

I have just had a look at my lease (I own a 900 year lease)- it states that the Management Company is responsible for all work to the exterior of the building to include the doors and railings and Landlords/owners may carry out any internal work that they choose, providing it does not affect the structural integrity of the building.

I have never heard of a case where a tenant was asked out of the blue to fork up a charge such as you are describing, to right what amounts to general wear and tear in a complex.

If you have signed the contract- do you have a get-out clause? I.e. can you immediately hand in your notice and threaten to quit?

As you are not an owner- what benefit are you supposed to get from this massive investment? (there was a thread in this forum some time back where a landlord was thinking of trying to reclaim his management fees from the Management Company when he was selling his property- until it was pointed out to him that the remedial work carried out enhanced the value of the property and its resale potential- however if you are renting this is not the case).

Read the contract/lease you signed- read all the little details, and consult a solicitor promptly.

quad_red

Cheers Smccarrick,
It is rather ridiculous to present a business, any business, with such a demand for money.

The contract (I believe) should never have been signed. It's basically got a dilapidation clause - which defeats the purpose of renting the building.

There is only mention of the exterior interior when it comes to clauses stipulating what condition they should be kept it.

The contract crazily says the tenants are responsible for all 'repairs, reknewals and rebuilds' :eek:

Can anyone recommend a solicitor or would any solicitor be suitable here?

cheers
quad

Victor

quad_red wrote:

the Tenant shall pay to the Landlord the Provisional Charge within fourteen days of the service of such notice.

The 14 days seems to be weird all right.

What is the title on the contract? Does it say something like "Fully Repairing and Insuring?" (FRI) or "Internally Repairing and Insuring?" (IRI) - these would be standard contracts.

I suspect any solicitor dealing in commercial property should be able to help you out.

quad_red

Victor wrote:

The 14 days seems to be weird all right.

What is the title on the contract? Does it say something like "Fully Repairing and Insuring?" (FRI) or "Internally Repairing and Insuring?" (IRI) - these would be standard contracts.

I suspect any solicitor dealing in commercial property should be able to help you out.

It doesn't say either FRI or IRI. It just says Lease (and the attached document is a Supplemental Lease).

There doesn't seem to be any strict defintion of exterior/interior.

In regards to repairs:
The original contract said
'To repair maintain renew and rebuild the Demised Premises and to put them and keep them in good and substantial repair and to replace any landlord's fixtures and fittings in the Demised Premises which become beyond repair damage by the insured risks expected.

This was then deleted in the supplemental deed and replaced by:
'To carry, repair, maintain, renew and rebuild the Demised Premises and to put and keep same in good and substantial repair and condition and to replace any landlord's fixtures and fittings in the Demised Premises which become beyond repair'


But, totally confusingly, under the Landlord's Covenants in regards to Repairing Fire Damage:
'Subject to receipt by the Landlord of the Service Charge from the Tenant throughout the term to carry repair, maintain, renew and rebuild the Demised Premises and to put and keep the same in good and substantial repair and condition'

But there is NO other mention of the Service Charge in the Original Contract !?!??!?!?

Strikes me as highly unusual.

The bad news is that a lease is a contract, and as a general rule of contract law once you sign up then you are bound by the conditions no matter how onerous.

In recent years though, there has been a tendency to challenge certain contracts under EU legislation protecting consumers, so there may be a chink of light.

One thing you omitted to say - is this a lease for residential or commercial property? There is legislation governing the former, such as the Residential Tenancies Act, which may also be relevant.

lomb

i think its commerical from what hes saying. if its any help i was talkign to a solicitor who was telling me about onerous clauses in commerical leases. a clause was written that the tenants had to pay for any refurbishments to the complex (some kind of shopping center)
anyway the bill per shop was near 60-70 grand, the tenants didnt even have long leases at nominal rents but had 20 year standard market rates leases.the solicitor reakoned it best that a settlement was made , say around half that. no idea what happened. he reakoned people should read what they sign.
i think there is some law that says that service charges must be reasonable. it doesnt sound reasonable in your case. there should be a sinking fund. u may have some kind of claim against your previous solicitor who advised you- but this is a last resort as there is good faith in all deals so as to speak.
talk to a solicitor and consider going to court. making some kind of settlement may be better though?
what kind of building is it, office or retail, and what interest do u have, is it a 20 year type lease or a 999 year type lease? are there other users of the building? can u band together and share legal costs/advice?

antoinolachtnai

the OP really hasn't given us all the details. If it is a commercial lease, then it only seems a little crazy. It is a fairly normal condition of a commercial lease that the tenant is responsible for upkeep.

It is worth saying that if all these things were wrong before the lease commenced, then the landlord probably isn't entitled to force you to repair them.

It sounds like the lease was carelessly drafted out of boilerplate. I'd get ready to spend some money with a solicitor.

The real problem is that if the building really does need work, and you don't win on the legal side, you will be responsible for any subsequent damage caused by the ingress of water or subsequent collapse.

quad_red

Cheers for the info guys.

Yup, it's a commercial lease - 25 years. The amount that has been quoted is CONSIDERABLE.

I would say that the person who signed the contract (now no longer in Ireland) wouldn't have had much idea about what he was signing.

After ten years there is a breakout clause in the contract (which comes up next year).

The work is largely aesthetic (and even then it seems enormously overpriced). I think another survey and some solicitor advise is the way to go.

I suppose what I want to know - is this unusual? What sort of leases do most businesses have? Is this usual? What, in your experience, do you guys think?

My employers are worried and they want to know is this usual in Ireland.

Victor

Given that you only have two weeks to challenge this, go to solicitor straight away.

Yup, it's a commercial lease - 25 years. The amount that has been quoted is 100k+.

The usuals are either a 4 year 9 month contract or a 35 year contract. Typically you can have break periods at 5-10 year intervals, and rent reviews at 5 year intervals.

Suffice to say, my employers are not Irish and the property is in D4 (which should tell you what it is). I would say that the person who signed the contract (now no longer in Ireland) wouldn't have had much idea about what he was signing.

Stupid, but if he was seen to have been exploited, the court may void that section.

After ten years there is a breakout clause in the contract (which comes up next year).

Depending on the rent, they might want the tenant out, but it just sounds like a shakedown.

The work is largely aesthetic (and even then it seems enormously overpriced). I think another survey and some solicitor advise is the way to go.

You need two people (a) a solicitor experienced in leases (b) someone to analyse their costs, probably a quantity surveyor or loss adjuster.

I suppose what I want to know - is this unusual?

It seems so, the usual is for the tenant to return the building in good condition, adjusted perhaps for new building regulations.

What sort of leases do most businesses have?

35 year FRI or IRI.

Is this usual? What, in your experience, do you guys think?

Shakedown, with the intention of embarrassing the tenant if they don't pay up.

My employers are worried and they want to know is this usual in Ireland.

I would say no.

quad_red

quad_red wrote:

I would say that the person who signed the contract (now no longer in Ireland) wouldn't have had much idea about what he was signing.

Doesn't matter. Once something is signed they don't look at how clued in the signatory was.

25 year commercial leases usually have a clause that the tenant must keep everything in a good state of repair order and condition. It's fairly standard. Caselaw has shown that this also implies a requirement to put into good repair that which is not in good reopair at the outset of the lease eg. structural defects. Furthermore, if it's a commercial lease you may not be a 'consumer' but rather a businessperson, and you may not get the full protection of legislation to protect the consumer.

If you want a Solicitor in Dublin city centre PM me and I'll give you a name. You really need to sit down with one.

lomb

Deleted User wrote:

Doesn't matter. Once something is signed they don't look at how clued in the signatory was.

25 year commercial leases usually have a clause that the tenant must keep everything in a good state of repair order and condition.

renting commercial property is suicide imho, there are so many clauses that if they want to screw u they can. im just thankful we got a 999 year lease and we are resposnsible for our own maintaince and roof. but they can still screw us for the estate management... the government needs to do something to protect commercial tenants.
well if its D4 then its offices and anyone crazy enough to sign a 25 year lease on an office needs their head examined. an office can pick up and move overnight. retail is anotehr story though, where u 'need' the same business premises...

Victor

Deleted User wrote:

Doesn't matter. Once something is signed they don't look at how clued in the signatory was.

Unless there was fraud or manipulation going on, which is something I would investigate in this case. But one would have to say "we are all grown up now, no backing out".

What if the original core clause was struck out by agreement, but a residue was left in another clause?

Caselaw has shown that this also implies a requirement to put into good repair that which is not in good reopair at the outset of the lease eg. structural defects.

I think this is profoundly unfair, although I did use it to squeeze IEP25,000 out of someone who rented a showroom with a unlevel 100 year old concrete floor. Yes, the landlord rented out a dodgy floor and the tenant had to pay for remediation when they moved out.

lomb wrote:

renting commercial property is suicide imho,

Not necessarily. If property would tie up too much capital and you have an OK future cashflow, it makes sense, e.g. phone companies.

but they can still screw us for the estate management...

Its something to negotiate properly. Generally not needed in standalone properties, but in shared properties a formula can be agreed for a certain level of service and how to increase it into the future. Including everything in the rent is the ideal.

the government needs to do something to protect commercial tenants.

Isn't that .... communism!

lomb, break clauses solve many of the problems, although you then need someone to take on your problems, not an issue if the location is in demand.

lomb

Victor wrote:

I think this is profoundly unfair, although I did use it to squeeze IEP25,000 out of someone who rented a showroom with a unlevel 100 year old concrete floor. Yes, the landlord rented out a dodgy floor and the tenant had to pay for remediation when they moved out.

are u saying u rented out a dodgy floor, and charged the tenant for it to fix it? thats crazy, that is unfair and should be an illegal clause imho. funnily enough i read a shorter lease contract recently and it stated that the landlord be responsible to reinstate a building in case of fire. where does this leave a tenant that 'needs' to get up and trading ASAP. in the hands of the landlord? the landlord also has the option of terminating a lease if the place burns down. so basically that means that if u have paid a premium say to trade on a major street, and the place burns down, u theoretically could have lost your premium if the place gets lit up! and your business/trade if the landlord decides not to reninstate it.

Victor wrote:

lomb, break clauses solve many of the problems, although you then need someone to take on your problems, not an issue if the location is in demand.

well weve bought a 999 year lease at a nominal pepercorn rental, we are responsible for our own repairs etc i doubt wel b breaking it any time soon:D the clauses for estate management are left very open , with the landlord deciding whether or not to put in security, maintainance etc etc. but it does state that the charges must be 'reasonable' and that we be members of the management company.also the landlord is a low cost operator and luckily theyve no interest in wasting money. im hoping they stay for many many years...

Victor

lomb wrote:

are u saying u rented out a dodgy floor,

Our client bought a building from a cowboy developer who had let that area to criminal tenant! :eek:

lomb wrote:

and charged the tenant for it to fix it? thats crazy, that is unfair and should be an illegal clause imho.

I would largely concur, but that is what everyone signed up to.

funnily enough i read a shorter lease contract recently and it stated that the landlord be responsible to reinstate a building in case of fire. where does this leave a tenant that 'needs' to get up and trading ASAP. in the hands of the landlord? the landlord also has the option of terminating a lease if the place burns down.

In such a case, business disruption insurance would be very important.